HR Outsourcing Issues - Essay Example

Introduction The world economy is undergoing a rapid transformation and the recessive trend in the market is increasingly becoming a threat. In such a scenario, the organizations are looking towards cost cutting measures to meet the challenges of the emerging new economic equations. HR outsourcing offers an organization to let outside agencies to do some of its non core tasks and work processes. It offers them a very tempting and lucrative business opportunity to continue their core business activities with considerably less recurring cost of managing routine and relatively less creative organizational tasks. The boom in information technology coupled with expanding internet solutions, especially in the fast advancing countries like China and India, opened up avenues for outsourcing at a much lower wages. Thus facilitating recovering of losses incurred during recession. Benefits of Human Resource Outsourcing for employees Outsourcing has given the unique opportunity to the companies and organizations to concentrate on their core mission thus widening the scope of research and advancement which is more creative and financially lucrative in the long run. Outsourcing of jobs has precipitated the process of globalization. It has given a new meaning to the word which had hitherto included placement of human resource in multinational environment. Today one need not actually go to foreign soil to work but the reverse has become a virtual reality indeed! Foreign work place in domestic environment has become a reality through fast speed broadband. The whole process has greatly helped in developing mutual trust and understanding between the countries and hugely contributed towards job opportunities and employment across the globe. The process of outsourcing has created jobs for thousands of aspirants in developing and under-developed countries. It has also provided and helped to overcome the prejudices of racial and cross cultural values and misunderstandings, amongst the employees and employers alike. The employees of the outsourcing units have gained considerable knowledge about the wide ranging issues and areas of professional competencies. The employees of the outsourced units too have been able to improve and improvise their professional competencies as outsourcing of mundane and routine work has provided them with more opportunities to focus on their own core competencies. Benefits of Human Resource Outsourcing for managers According to P.F.Drucker, ‘access to information represents the basic precondition for success of a firm’ (Drucker, 1998). Access to information is vital part of organizational management processes as it not only promotes efficiency and knowledge based discharge of duties by the employees but it a great tool for the management to exploit the available information to improve its performance. The recent times have seen a floodgate of business opportunities in the emerging globalization and the emerging business paradigms have made it imperative for the organizations to outsource their routine work. The changing perspectives of the contemporary business practices, vis-à-vis their non core activities, are the main reasons for the organizations to outsource them. Apart from the need to be focused in the highly competitive business environment, other compulsions like the need to adopt cost cutting measures, expand core business activities and exploit the technology to gain larger market share in the emerging economy, are important factors that play important role in the decision to HR outsourcing. Strategies for outsourcing HR services HR outsourcing is a crucial management decision that needs careful considerations of the pros and cons of the organizational processes. The world economy is undergoing a rapid transformation and the recessive trend in the market is increasingly becoming a threat. In such a scenario, the organizations are looking towards cost cutting measures to meet the challenges of the emerging new economic equations. The various factors and management issues that may have direct and indirect impact on the overall performance of the organization must be studied and thereafter a comprehensive strategy should be formulated that best serves the interests of the organization. As suggested earlier, the non core activities which follow a set pattern and have relatively less scope of major changes in their basic formats are easier to outsource. The non core activities could be efficiently and effectively managed virtually through internet. Routine tasks like accounting, customer-relation, software- development, data-processing etc. can be efficiently and effectively managed virtually through internet and therefore, could be easily outsourced. As Andrew Grove, the CEO of Intel Corporation, said in a speech, "From a technical and productivity standpoint, the engineer sitting 6,000 miles away might as well be in the next cubicle and on the local area network." (Chandra, Yaleglobal). Outsourcing is a complex process and management must carry out detail study to identify the areas of the organizational structure and processes that need to be outsourced. A comprehensive internal audit ensures that the processes that are outsourced do prove to be cost effective. It also helps to formulate a full scope of the contract with details of cost and service level agreement that brings in transparency in the contract between the two parties involved. Flexibility is an important part of agreement between the parties because one needs to be flexible to incorporate the changes that are inevitable over the time. Therefore, short period contract ensure better compliance with the changing environment of business. Mia Knights has quoted Stuart Harris, partner in TPI, a global outsourcing advisory firm, in her article by saying. ‘it is also critical for buyers to recognize that the manner in which an outsourcing relationship is managed is as important as forging the relationship at the outset - if not more so’( Knights, 2007). There highly pertinent issue of data security and security of official information are equally important factors while outsourcing. Confidential employees’ information and organizational information regarding its strategies and policies are sensitive information that must be well guarded to maintain competitive edge over the rivals. Plewes, in one of his articles in 2007 has quoted Susan MacLean, a member of law firm Morrison & Foresters Global Sourcing group, ‘Outsourcing can be very effective in transferring risk, especially in pricing and operational risk, but supplier management is absolutely crucial to make it a success and some companies dont put enough emphasis on it..’ (Plews, 2007). These types of information are important security risks that need to be protected from becoming public knowledge. Hence, the contract must be tightly structured with clear cut clauses so that there are least chances of security lapses. Reference Chandra, Nayan. 27 Feb. 2004. Challenges of virtual office space. Available from: [Accessed 13 December, 2008]. Drucker, P.F. Next information revolution. Forbes, 24 August, 1998. Database: Academic Search Elite. Knights, Mia. 21 March, 2007. Outsourcing dissatisfaction runs high. Available from: [Accessed 13 December, 2008]. Plewes, Anthony. 23 July, 2007. IT Risk Management. 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